Cable TV deal reflects reality

Say this about the deal announced last Thursday for Comcast to buy Time Warner Cable: Itís big. Big price tag of $45 billion. Big combined subscriber base of 30 million households. And, big risk of a veto from government antitrust regulators, whose approval is needed for the deal to proceed.

Say this about the deal announced last Thursday for Comcast to buy Time Warner Cable: Itís big. Big price tag of $45 billion. Big combined subscriber base of 30 million households. And, big risk of a veto from government antitrust regulators, whose approval is needed for the deal to proceed.

In a larger view, the merger makes some sense, even though it looks like a classic case of a big new company with more pricing power and market dominance.

Think about this a beat or two and consider the fact that the nature of TV viewing habits is once more in flux. American consumers have never had so many options for digital video news and entertainment, and those options are growing. Americans raised in an era of only three network TV channels now have computer, smartphone and TV access ó a wealth not only of content, but of platforms to deliver that content. As this diversity of service options rapidly expands, the reflexive distrust of big-company mergers loses its oomph.

The initial worries about a Comcast-Time Warner deal seem overblown. We doubt that consumers would be stuck paying more for cable and broadband service, as some critics fear. We also doubt that content providers such as ESPN or The Weather Channel would lose bargaining power in their future negotiations with a combined cable behemoth.

One factor that would keep the merged company honest is the competition among delivery platforms. For years, cable operators have lost customers not so much to each other as to the likes of AT&T, Verizon and DirecTV. Content providers routinely pit cable, telecomm and satellite operators against each other in negotiating deals. If Comcast dropped a popular channel that its archrivals in the same market still offered, its customers would bolt ó a mutiny not possible in earlier decades when only cable or clunky antennas could provide content.

Today, though, Internet TV services such as Netflix and Hulu hold the potential to compete against or even cripple cable. It hasnít happened yet: Most users of those Web services also subscribe to pay TV. But as streaming improves and Internet companies perfect their business models, expect to see an online challenge to cable that would provide ever more checks and balances in the marketplace. Donít be startled if, someday, technology improvements by its rivals render the cable industry extinct.

These weak growth prospects and competitive challenges put a premium on efficiency. Comcast says the merger would result in significant cost savings, which ultimately would give it more latitude to offer its customers better deals. Comcast is also vowing to offer superior video, higher broadband speeds and the fastest in-home Wi-Fi to more households.

Cable companies have no choice but to keep modernizing, or their customers will desert them for noncable alternatives. On face value, itís a survival move by two mega-companies that need each other. We bet consumers could ultimately be the winners.